ALTERNATIVE RESEARCH AND CORPORATE ACCESS SOLUTIONS UNDER MIFID II

Linear Investments Chairman, Jerry Lees, investigates the advances in technology designed to ease the research burden for UK corporates, fund managers and investors under MIFID II.

In September 2017, the FCA made it clear that corporate access was not research and could therefore not be paid for out of investors assets. It would be considered an inducement if the asset manager accepted corporate access from a broker for free. This approach set out by the FCA is expected to be more stringently enforced under MIFID II.

Debating the cost of research under the new MIFID II regulations is a well-trodden path and UK corporates, asset managers and investors should have already made decisions on how they will approach the new regulations which came in to effect on 3rdJanuary this year. It is obvious however that many firms are still struggling with the scale of the changes and problems arising from MiFID II.

There is a need to build and augment new systems and ideas to get this all-important research to market. The sell-side need to offer flexible access to research and a flexible pricing model for the cost of that research.

Providers of technology that bring the investor and company together are providing the shake up the market needs. Online services can be particularly important for smaller companies who struggle to get their message out to the investor market and spread information about themselves more widely. Independent platforms can help out as technology plays a growing role in the relationship between investors and companies.

Several companies are exploring ways to communicate with investors direct, negating the need for middlemen such as banks and brokers. Corporate internal Investor Relations teams are getting more robust and these teams are organising roadshows and meetings direct. A survey of about 300 financial institutions by the UK’s Investor Relations Society and QuantiFire, an investor relations service provider, found that more than half planned to use brokers less for corporate access and said they would be more reliant on companies instead.

At Linear Investments, we believe in using technology to advance business strategy and ease regulatory burdens for both ourselves and our clients. Linear has invested heavily in the technology of the future, understanding the key to success with both current and future regulation is the ability to share information in a fast, succinct and complaint manner. Working with a number of UK corporates we are able to produce real time, relevant and educational broadcasts for the benefit of asset managers and investors looking to reduce their research burden. With a full studio at our offices in Belgravia, London, we are able to stream, record and produce media quickly and effectively to help companies and asset managers work within the MIFID II research guidelines.

The ability to stream information and interviews on live TV to your market audience in broadcast quality HD with sufficient bandwidth for a real time Q and A could allow you to get your message and research across in a fast, efficient and cost effective way.  Linear can manage interactive feedback and viewer question sessions in real time and provide professional presenters for your broadcast. As well as broadcasting in real time, we are able to provide condensed programmes for distribution after the live event.

Managers on the sell-side providing research under MiFID II are obligated to unbundle the cost of their services: separating the cost of execution, research, advisory services and corporate access. They must avoid inducing clients to transact business by providing research at less than its actual cost, as well as categorising the research they provide under the terms set out in the MIFID II Directive. The idea is that investors will get an accurate breakdown of their fees. Provision of free research provided by sell-side firms is not permitted, as this is considered an inducement to trade. With this in mind, direct access to investors may work well for corporates.

Asset managers are now more selective of the research they receive due to the cost involved, and as yet haven’t had time to assess what they need and how much they should be paying for it. UK corporates are moving fast to build out their investor relations teams and reach out to the investor direct. Independent research houses can and will form, as they are able to produce niche research that larger firms find uneconomical to produce, or for which they do not have in house expertise. Premium research takes many forms; corporate access and time with top analysts being just one and while research obligations have been widely reported on, much less so the issues around corporate access.

The old corporate access model has been compromised by MiFID II. Technology is the future, and Linear are working constantly to produce a great value solution for our clients.

If you would like to know more, visit www.linearinvestment.com or email info@linearinvestment.com